COMMISSIONER OF INCOME TAX Vs. CASINO PRIVATE LIMITED

JUDGEMENT

(1.) THIS is a reference to this court under Section 256(1) of the Income -tax Act, 1961, arid the question referred to us is :

(2.) THE assessee is a private limited company running a hotel business. In connection with the assessment of the company for the year 1968 -69, the assessee claimed to be an " industrial company " as the term is denned in the Finance Act, 1968. THE claim to be assessed at the rate of tax applicable to an industrial company, namely, at 55 per cent, of the net income, was not accepted by the Income -tax Officer. Before the Appellate Assistant Commissioner it was contended by the assessee that the activity of the assessee is one of converting the raw materials into finished products, namely, foodstuffs, and, therefore, the assessee was carrying on the activity of manufacturing. A company engaged in the process of manufacturing being included in the definition of an industrial company by the definition in Section 2(6)(d) of the Finance Act, 1968, the assessee claimed that it should be taxed at the rate applicable to an industrial company. THE Appellate Assistant Commissioner found that though manufacturing operations were carried on by the assessee in the conduct of its business, a hotel could not be deemed to be a manufacturing unit in the sense in which the term is ordinarily understood. He dismissed the appeal. THE assessee filed a further appeal before the Income -tax Appellate Tribunal. THE Tribunal considered the meaning to be given to the term " manufacture " and also considered the judicial interpretation of the term in certain decisions of courts and found that the activity carried on by the assessee in manufacturing articles of food from raw materials such as grains, pulses, meat, vegetables, etc., constituted "manufacture or processing of goods" within the meaning of Section 2(6)(d) of the Finance Act and, therefore, the assessee was an industrial company. This reference has arisen out of the said order of the Tribunal.

(3.) PARAGRAPH F of Part I of the First Schedule deals with the rates of income -tax in the case of a company other than the Life Insurance Corporation of India. In the case of a domestic company where the company is not one in which the public are substantially interested, and if it be an industrial company, the tax is 55 per cent, on so much of the income as does not exceed Rs. 10,00,000 and on the balance, if any, at 60 per cent. If the domestic company is one where public are not substantially interested and is also not an industrial company, the rate of tax is 65 per cent, of the total income. The total income of the assessee does not exceed Rs. 10,00,000 and it is a domestic company in which the public are not substantially interested. Therefore, if it is an industrial company the tax it has to pay for the assessment year 1968 -69 is 55 per cent, of its total income whereas if it is not an industrial company it has to pay tax at 65 per cent.